FORM 10-Q--QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
(As last amended in Rel. No 312905, eff. 4/26/93.)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1995
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period.........to.........
Commission file number 0-11723
CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
(Exact name of registrant as specified in its charter)
California 94-2883067
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Insignia Financial Plaza, P.O. Box 1089
Greenville, South Carolina 29602
(Address of principal executive offices) (Zip Code)
Registrant's telephone number (803) 239-1000
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period
that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X . No .
<PAGE>
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
BALANCE SHEET
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
<S> <C> <C>
Assets
Cash $ 3,013 $ 1,351
Securities available for sale 9,356 9,769
Prepaid expenses and other assets 531 575
Due from affiliates -- 1,347
Net investment in master loan 43,230 42,531
Investment properties:
Land 1,247 1,247
Building and related personal property 7,847 7,578
9,094 8,825
Less accumulated depreciation (3,741) (3,325)
5,353 5,500
$ 61,483 $ 61,073
Liabilities and Partners' Capital (Deficit)
Accounts payable and accrued expenses $ 235 $ 89
Tenant security deposits 113 106
Distributions payable 141 141
Accrued taxes -- 73
489 409
Partners' Capital (Deficit)
General partner (495) (498)
Limited partners (909,145 units outstanding) 61,489 61,162
60,994 60,664
$ 61,483 $ 61,073
</TABLE>
See Accompanying Notes to Financial Statements
1
<PAGE>
b) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Revenues:
Rental income $ 505 $ 408 $ 994 $ 830
Interest on investment
in master loan to
affiliate -- 739 699 824
Interest and dividend
income on investments 175 160 334 308
Total revenues 680 1,307 2,027 1,962
Expenses:
Property operations 409 398 663 811
Depreciation 254 239 473 471
Administrative 250 150 561 326
Total expenses 913 787 1,697 1,608
Other income -- -- -- 91
Net (loss) income $ (233) $ 520 $ 330 $ 445
Net (loss) income allocated
to general partners (1%) $ (2) $ 5 $ 3 $ 4
Net (loss) income allocated
to limited partners (99%) (231) 515 327 441
$ (233) $ 520 $ 330 $ 445
Net (loss) income per
limited partnership unit $ (.25) $ .56 $ .36 $ .48
</TABLE>
See Accompanying Notes to Financial Statements
2
<PAGE>
c) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)
(Unaudited)
(in thousands, except unit data)
<TABLE>
<CAPTION>
Limited
Partnership General Limited
Units Partner Partners Total
<S> <C> <C> <C> <C>
Original capital contributions 912,182 $ 1 $228,046 $228,047
Partners' capital (deficit) at
December 31, 1993 909,154 $ (391) $ 71,791 $ 71,400
Net income for the six months
ended June 30, 1994 -- 4 441 445
Partners' capital (deficit) at
June 30, 1994 909,154 $ (387) $ 72,232 $ 71,845
Partners' capital (deficit) at
December 31, 1994 909,145 $ (498) $ 61,162 $ 60,664
Net income for the six months
ended June 30, 1995 -- 3 327 330
Partners' capital (deficit) at
June 30, 1995 909,145 $ (495) $ 61,489 $ 60,994
</TABLE>
See Accompanying Notes to Financial Statements
3
<PAGE>
d) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
<S> <C> <C>
1995 1994
Cash flows from operating activities:
Net income $ 330 $ 445
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation 473 471
Change in accounts:
Prepaid expenses and other assets (12) --
Interest receivable master loan (699) (485)
Accounts payable and accrued expenses 146 (25)
Distributions payable -- (2)
Due from affiliates 1,347 (8)
Tenant security deposits 7 19
Accrued taxes (73) (19)
Net cash provided by
operating activities 1,519 396
Cash flows from investing activities:
Property improvements and replacements (270) (403)
Principal receipts on Master Loan -- 43
Purchase of securities available for sale (30,096) (1,472)
Proceeds from sale of securities
available for sale 30,509 3,817
Net cash provided by investing
activities 143 1,985
Cash flow from financing activities: -- --
Net increase in cash 1,662 2,381
Cash at beginning of period 1,351 1,912
Cash at end of period $ 3,013 $ 4,293
</TABLE>
See Accompanying Notes to Financial Statements
4
<PAGE>
e) CONSOLIDATED CAPITAL INSTITUTIONAL PROPERTIES/2
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information and with the instructions to Form 10-Q and Article
10 of Regulation S-X. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of the
General Partner, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included. Operating results for the three and six month periods ended
June 30, 1995, are not necessarily indicative of the results that may be
expected for the fiscal year ending December 31, 1995. For further
information, refer to the financial statements and footnotes thereto
included in the Partnership's annual report on Form 10-K for the year
ended December 31, 1994.
Certain reclassifications have been made to the 1994 information to
conform to the 1995 presentation.
Investment in Master Loan
The New Master Loan agreement is considered investments in
acquisition, development, and construction ("ADC") loans, primarily
because the Partnership is entitled to receive, according to the
provisions of the New Master Loan agreement, in excess of 50% of the
residual profits from the sale or refinancing of the properties securing
the agreements. The investment in Master Loan is accounted for by the
cost method, whereby income from the investment is recognized as
interest income to the extent of payments received and losses in the
estimated net realizable value of the investment are recognized in the
period they are identified. Interest income contractually due according
to the terms of the New Master Loan agreement in excess of payments
received is deferred. As of June 30, 1995, and December 31, 1994, such
cumulative deferred interest, which is not included in the balance of
the net investment in Master Loan, totaled $102.6 million and $93.9
million, respectively.
Note B - Related Party Transactions
Consolidated Capital Institutional Properties/2 ("Partnership") paid
property management fees based upon collected gross rental revenues for
property management services as noted below for the six month periods
ended June 30, 1995 and 1994. For the six months ended June 30, 1994, a
portion of such property management fees were paid to an unaffiliated
property management company for day-to-day property management services
and a portion was paid to Partnership
5
<PAGE>
Note B - Related Party Transactions - continued
Services, Inc. ("PSI") for advisory services related to day-to-day
property operations. In late December 1994, an affiliate of Insignia
assumed day-to-day property management responsibilities for all of the
Partnerships' properties. Fees paid to affiliates of Insignia during
the six months ended June 30, 1995, and fees paid to PSI for the six
months ended June 30, 1994, are reflected in the following table:
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
1995 1994
(in thousands)
<S> <C> <C>
Property management fees $ 52 $ 8
</TABLE>
The Partnership Agreement ("Agreement") also provides for
reimbursement to the General Partner and its affiliates for
costs incurred in connection with the administration of
Partnership activities. The General Partner and its current and former
affiliates, which includes Coventry Properties, Inc. ("Coventry") for
the six months ended June 30, 1994, received reimbursements as reflected
in the following table:
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
1995 1994
(in thousands)
<S> <C> <C>
Reimbursement for services of affiliates $296 $168
</TABLE>
Note C - Net Investment in Master Loan
Interest due to the Partnership according to the terms of the New
Master Loan Agreement, but not recognized in the income statements,
totaled approximately $8.7 million and $7.8 million for the six months
ended June 30, 1995 and 1994, respectively. At June 30, 1995, and
December 31, 1994, such cumulative unrecognized interest totaling
approximately $102.6 million and $93.9 million was not included in the
balance of the investment in Master Loan.
6
<PAGE>
Note D - Other Income
In 1991, the Partnership (and simultaneously other affiliated
partnerships) entered claims in Southmark Corporation's Chapter 11
bankruptcy proceeding. These claims related to Southmark Corporation's
activities while it exercised control (directly, or indirectly through
its affiliates) over the Partnership. The Bankruptcy Court set the
Partnership's and the affiliated partnerships' allowed claim at $11
million, in the aggregate. In March 1994, the Partnership received
1,468 shares of Southmark Corporation Redeemable Series A Preferred
Stock and 10,738 shares of Southmark Corporation New common Stock with
an aggregate market value on the date of receipt of $11,000 and $80,472
in cash representing the Partnership's share of the recovery, based on
its pro rata share of the claims filed.
Note E - Commitment
The Partnership is required by the Agreement to maintain working
capital reserves for contingencies of not less than 5% of Net Invested
Capital, as defined in the Agreement. In the event expenditures are made
from this reserve, operating revenue shall be allocated to such reserves
to the extent necessary to maintain the foregoing level. Reserves,
including cash and securities available for sale, totalling
approximately $12.4 million, were greater than the reserve requirement
of $7.6 million at June 30, 1995.
Note F - Abandonment of Limited Partnership Units
In the first six months of 1995, the number of Limited Partnership
Units decreased by seven units due to limited partners abandoning their
units. In abandoning his or her Limited Partnership Units, a limited
partner relinquishes all right, title and interest in the Partnership as
of the date of abandonment.
The net (loss) income per limited partnership unit in the
accompanying statements of operations is calculated based on the number
of units outstanding at the end of the period.
7
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS
The Partnership's investment property consists of one office
building. The following table sets forth the average occupancy of this
property for the six months ended June 30, 1995 and 1994:
<TABLE>
<CAPTION>
Average
Occupancy
<S> <C> <C>
Property 1995 1994
North Park Plaza
Southfield, Michigan 59% 56%
</TABLE>
The General Partner attributes the increase in occupancy to its
efforts to attract new tenants. During the third quarter of 1995, the
General Partner expects a new tenant to occupy approximately 18,000
square feet of space.
The Partnership's net income for the six months ended June 30, 1995,
was approximately $330,000 as compared to net income of approximately
$445,000 for the six months ended June 30, 1994. The Partnership
realized a net loss of approximately $233,000 for the three months ended
June 30, 1995, as compared to net income of $520,000 for the three
months ended June 30, 1994. The decrease in net income for both the
three and six month periods ended June 30, 1995, is primarily due to a
decrease in interest income on the Master Loan due to decreased cash
flows at the affiliated investment properties (income is recorded based
on the cash flow of the properties collateralized by the Master Loan).
Also, administrative expenses for the three and six month periods
increased due to the increase in expenses related to the combined
efforts of the Dallas and Greenville offices during the transition
period for the six months ended June 30, 1995. The increased costs
related to the transition efforts were incurred to minimize any
disruption in the year-end reporting function including the financial
reporting and K-1 preparation and distribution. The General Partner
expects administrative expenses to be reduced beginning in the third
quarter of 1995 as the transition efforts are now complete. Offsetting
these decreases in net income is an increase in rental income due to
increased rental rates and higher occupancy rates at North Park Plaza
and a decrease in property operations expense due to decreased taxes and
personnel and service costs.
Other income realized in the six months ended June 30, 1994, is due
to the receipt of its pro rata share of the claims filed in Southmark's
Chapter 11 bankruptcy proceedings. (See Note D).
As part of the ongoing business plan of the Partnership, the General
Partner monitors the rental market environment of each of its investment
properties to assess the feasibility of increasing rents, maintaining or
increasing occupancy levels and protecting the Partnership from
increases in expenses. As part of this plan, the General Partner
attempts to protect the Partnership from the burden of inflation-related
increases in expenses by increasing rents and maintaining a high overall
occupancy level. However, due to changing market conditions, which can
result in the use of rental
8
<PAGE>
concessions and rental reductions to offset softening market conditions,
there is no guarantee that the General Partner will be able to sustain
such a plan.
At June 30, 1995, the Partnership reported cash of approximately
$3,013,000 versus cash of approximately $4,293,000 for the corresponding
period of 1994. Net cash provided by operating activities increased due
to a decrease in due from affiliates. The decrease in due from
affiliates resulted from the payment of the December 31, 1994, accrued
interest receivable on the Master Loan which had been recorded as "due
from affiliate" at December 31, 1994. Net cash provided by investing
activities decreased primarily due to the increase in purchases of
securities available for sale which was only partially offset by an
increase in proceeds from sale of securities available for sale.
The sufficiency of existing liquid assets to meet future liquidity
and capital expenditure requirements is directly related to the level of
capital expenditures required at the property to adequately maintain the
physical assets and other operating needs of the Partnership. Such
assets are currently thought to be sufficient for any near-term needs of
the Partnership. No distributions were made in the six months ended
June 30, 1995 or 1994. Future cash distributions will depend on the
levels of net cash generated from operations, master loan interest
income, property sales, and the availability of cash reserves.
9
<PAGE>
PART II - OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits:
S-K Reference
Number Description
27 Financial Data Schedule is filed as
an exhibit to this report.
28.1 Consolidated Capital Equity
Partners/Two, L.P., unaudited
financial statements for the six
months ended June 30, 1995 and 1994.
(b) Reports on Form 8-K:
A Form 8-K dated May 3, 1995, was filed reporting a change
in the Registrant's Certifying Accountant.
10
<PAGE>
SIGNATURES
In accordance with the requirements of the Exchange Act, the
registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
CONSOLIDATED CAPITAL INSTITUTIONAL
PROPERTIES/2
By: CONCAP EQUITIES, INC.
General Partner
By:/s/ Carroll D. Vinson
Carroll D. Vinson
President
By:/s/ Robert D. Long, Jr.
Robert D. Long, Jr.
Controller and Principal
Accounting Officer
Date:
11
<PAGE>
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from
Consolidated Capital Institutional Properties/2 Second Quarter 10-Q
and is qualified in its entirety by reference to such 10-Q filing.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 3,013
<SECURITIES> 9,356
<RECEIVABLES> 43,230
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 9,094
<DEPRECIATION> (3,741)
<TOTAL-ASSETS> 61,483
<CURRENT-LIABILITIES> 235
<BONDS> 0
<COMMON> 0
0
0
<OTHER-SE> 60,994
<TOTAL-LIABILITY-AND-EQUITY> 61,483
<SALES> 0
<TOTAL-REVENUES> 2,027
<CGS> 0
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 1,697
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> 0
<INCOME-TAX> 0
<INCOME-CONTINUING> 0
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 330
<EPS-PRIMARY> .36
<EPS-DILUTED> 0
</TABLE>
EXHIBIT 28.1
CONSOLIDATED CAPITAL EQUITY PARTNERS/TWO, L.P.
UNAUDITED FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED
JUNE 30, 1995 AND 1994
1
<PAGE>
EXHIBIT 28.1 (Continued)
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
a) CONSOLIDATED CAPITAL EQUITY PARTNERS/TWO, L.P.
BALANCE SHEET
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1995 1994
<S> <C> <C>
Assets
Cash $ 1,570 $ 1,936
Securities available for sale 402 390
Prepaid expenses and other assets 3,216 3,121
Investments in limited partnerships 2,508 2,508
Due from affiliates -- 10
Investment properties:
Land 13,337 13,418
Building and related personal
equipment 95,789 95,171
109,126 108,589
Less accumulated depreciation (51,059) (48,364)
58,067 60,225
$ 65,763 $ 68,190
Liabilities and Partners' Deficit
Accounts payable and accrued expenses $ 1,725 $ 1,781
Mortgage notes and interest payable 24,245 24,441
Master loan and interest payable 194,843 185,442
Due to affiliates -- 1,318
220,813 212,982
Partners' Deficit
General partner (1,537) (1,434)
Limited partners (153,513) (143,358)
(155,050) (144,792)
$ 65,763 $ 68,190
</TABLE>
See Accompanying Notes to Financial Statements
2
<PAGE>
EXHIBIT 28.1 (Continued)
b) CONSOLIDATED CAPITAL EQUITY PARTNERS/TWO, L.P.
STATEMENTS OF OPERATIONS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
<S> <C> <C> <C> <C>
1995 1994 1995 1994
Revenues:
Rental income $ 3,894 $ 4,602 $ 8,052 $ 9,077
Interest and distribution
income from investments 46 9 70 15
Total revenues 3,940 4,611 8,122 9,092
Expenses:
Property operations 2,018 2,512 4,509 5,146
Depreciation and amortization 1,458 1,444 2,920 2,897
Interest 5,290 4,992 10,584 9,928
Administrative 209 145 367 283
Total expenses 8,975 9,093 18,380 18,254
Net loss $(5,035) $(4,482) $(10,258) $(9,162)
Net loss allocated
to general partner (1%) $ (50) $ (45) $ (103) $ (92)
Net loss allocated
to limited partners (99%) (4,985) (4,437) (10,155) (9,070)
$(5,035) $(4,482) $(10,258) $(9,162)
</TABLE>
See Accompanying Notes to Financial Statements
3
<PAGE>
EXHIBIT 28.1 (Continued)
c) CONSOLIDATED CAPITAL EQUITY PARTNERS/TWO, L.P.
STATEMENT OF CHANGES IN PARTNERS' DEFICIT
(Unaudited)
For the Six Months Ended June 30, 1995 and 1994
(in thousands)
<TABLE>
<CAPTION>
General Limited
Partner Partners Total
<S> <C> <C> <C>
Partners's deficit at December 31, 1993 $(1,235) $(123,635) $(124,870)
Net loss for the six months ended
June 30, 1994 (92) (9,070) (9,162)
Partners' deficit at June 30, 1994 $(1,327) $(132,705) $(134,032)
Partners' deficit at December 31, 1994 $(1,434) $(143,358) $(144,792)
Net loss for the six months ended
June 30, 1995 (103) (10,155) (10,258)
Partners' deficit at June 30, 1995 $(1,537) $(153,513) $(155,050)
</TABLE>
See Accompanying Notes to Financial Statements
4
<PAGE>
EXHIBIT 28.1 (Continued)
d) CONSOLIDATED CAPITAL EQUITY PARTNERS/TWO, L.P.
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1995 1994
<S> <C> <C>
Cash flows from operating activities:
Net loss $(10,258) $(9,162)
Adjustments to reconcile net loss to net
cash provided by operating activities:
Depreciation and amortization 2,953 2,897
Change in accounts:
Prepaid expenses and other assets (354) (227)
Accounts payable and accrued expenses (55) (329)
Interest on master loan 9,401 7,854
Due to affiliates (1,308) 485
Interest payable 20 --
Net cash provided by
operating activities 399 1,518
Cash flows from investing activities:
Property improvements and replacements (537) (785)
Proceeds from sale of securities
available for sale 9,617 --
Purchase of securities available for sale (9,629) --
Net cash used in investing
activities (549) (785)
Cash flow used in financing activities:
Payments on notes payable (216) (269)
Payments on master loan -- (43)
Net cash used in financing
activities (216) (312)
</TABLE>
See Accompanying Notes to Financial Statements
5
<PAGE>
EXHIBIT 28.1 (Continued)
d) CONSOLIDATED CAPITAL EQUITY PARTNERS/TWO, L.P.
STATEMENTS OF CASH FLOWS (continued)
(Unaudited)
(in thousands)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
1995 1994
<S> <C> <C>
Net (decrease) increase in cash $ (366) $ 421
Cash at beginning of period 1,936 1,506
Cash at end of period $ 1,570 $ 1,927
Supplemental disclosure of cash flow
information:
Cash paid for interest $ 2,457 $ 1,581
</TABLE>
See Accompanying Notes to Financial Statements
6
<PAGE>
EXHIBIT 28.1 (Continued)
e) CONSOLIDATED CAPITAL EQUITY PARTNERS/TWO, L.P.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
Note A - Basis of Presentation
The accompanying unaudited financial statements have been prepared in
accordance with generally accepted accounting principles for interim
financial information. Accordingly, they do not include all of the
information and footnotes required by generally accepted accounting
principles for complete financial statements. In the opinion of the
General Partner, all adjustments (consisting of normal recurring
accruals) considered necessary for a fair presentation have been
included. Operating results for the six month period ended June 30,
1995, are not necessarily indicative of the results that may be expected
for the fiscal year ending December 31, 1995.
Certain reclassifications have been made to the 1994 information to
conform to the 1995 presentation.
Consolidation
In 1985, Equity Partners/Two ("EP/2"), a California general
partnership, together with Anderson CC 2, a Georgia limited partnership,
entered into a general partnership agreement ("CC Office Associates") to
acquire Cosmopolitan Center, an office building located in Atlanta,
Georgia. Pursuant to such general partnership agreement, the property
ownership is split 90%/10% between Consolidated Capital Equity
Partners/Two, L.P. ("Partnership"), as successor to EP/2, and Anderson
CC 2, respectively. The Partnership's investment in CC Office
Associates is consolidated in the Partnership's financial statements.
No minority interest liability has been reflected for Anderson CC 2's
minority 10% interest because the Master Loan balance, which is secured
by a deed of trust held by Consolidated Capital Institutional
Properties/2 ("CCIP/2") on Cosmopolitan Center, exceeds the value of the
property. As a result, CC Office Associates has a net capital deficit
and no minority liability exists with respect to the Partnership.
Investments in Limited Partnerships
The investments in limited partnerships represent certain interests
in four affiliated limited partnerships that were contributed by EP/2's
general partners to the Partnership. These investments are stated at
the lower of estimated fair value of the interests at the time of
contribution to the Partnership or the current estimated fair value of
the interests.
7
<PAGE>
EXHIBIT 28.1 (Continued)
Note B - Related Party Transactions
The Partnership paid property management fees based upon collected
gross rental revenues for property management services as noted below
for the six month periods ended June 30, 1995 and 1994. For the six
months ended June 30, 1994, a portion of such property management fees
were paid to the property management companies performing day-to-day
property management services and a portion was paid to Partnership
Services, Inc. ("PSI") for advisory services related to day-to-day
property operations. Coventry Properties, Inc. ("Coventry"), an
affiliate of the General Partner, provided day-to-day property
management responsibilities for four of the Partnership's properties
under the same management fee arrangement as the unaffiliated management
companies. In late December 1994, an affiliate of Insignia assumed day-
to-day property management responsibilities for all of the Partnerships'
properties. Fees paid to affiliates of Insignia during the six months
ended June 30, 1995, and fees paid to Coventry and PSI for the six
months ended June 30, 1994, are reflected in the following table.
Also, the Partnership is subject to an Investment Advisory Agreement
between the Partnership and an affiliate of ConCap Holdings, Inc.
("CHI"). This agreement provides for an annual fee, payable in monthly
installments, to an affiliate of CHI for advising and consulting
services for the Partnership's properties. Advisory fees paid pursuant
to this agreement are reflected in the following table:
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
1995 1994
(in thousands)
<S> <C> <C>
Property management fees $414 $254
Investment advisory fees 91 96
</TABLE>
Property management fees increased for the six months ended June 30,
1995, compared to the six months ended June 30, 1994, due to the fact
that only four of the Partnership's investment properties were managed
by Coventry during the six months ended June 30, 1994. All of the
Partnership's investment properties were managed by an affiliate of
Insignia during the six months ended June 30, 1995.
The Partnership Agreement ("Agreement") also provides for
reimbursement to the General Partner and its affiliates for costs
incurred in connection with the administration of Partnership
activities.
8
<PAGE>
EXHIBIT 28.1 (Continued)
Note B - Related Party Transactions (continued)
The General Partner and its current and former affiliates which
includes Coventry for the six months ended June 30, 1995 and 1994,
received reimbursements as reflected in the following table:
<TABLE>
<CAPTION>
For the Six Months Ended
June 30,
1995 1994
(in thousands)
<S> <C> <C>
Reimbursement for services of affiliates $232 $114
</TABLE>
Reimbursements for services of affiliates increased during the six
months ended June 30, 1995, compared to the six months ended June 30,
1994, due to increased expense reimbursements related to the combined
efforts of the Dallas and Greenville offices during the transition
period for the six months ended June 30, 1995. These increased costs
related to the transition efforts were incurred to minimize any
disruption in the year-end reporting function including the financial
reporting and K-1 preparation and distribution. The General Partner
expects administrative expenses to be reduced beginning in the third
quarter of 1995 as the transition efforts are now complete.
In addition to the compensation and reimbursements described above,
interest payments are made to, and loan advances are received from,
CCIP/2 pursuant to the New Master Loan Agreement, which is described
more fully in the 1994 Annual Report. No advances under the new Master
Loan Agreement were made during the six months ended June 30, 1995, and
June 30, 1994.
Note C - Master Loan and Accrued Interest Payable
The Master Loan and accrued interest payable balances at June 30,
1995 and December 31, 1994, are $194.8 million and $185.4 million,
respectively.
Terms of Master Loan Agreement
Under the terms of the Master Loan Agreement, interest accrues at 10%
per annum. The interest rates for each of the six month periods ended
June 30, 1995 and 1994 was 10%. Interest payments are currently payable
quarterly in an amount equal to "Excess Cash Flow", generally defined in
the Master Loan Agreement as net cash flow from operations after third-
party debt service. If such Excess Cash Flow payments are less than the
current accrued interest during the quarterly period, the unpaid
interest is added to principal, compounded annually, and is payable at
the loan's maturity. If such Excess Cash Flow payments are greater than
the currently payable interest, the excess amount is applied to the
principal balance of the loan. Any net proceeds from sale or
refinancing of any of the Partnership's properties are paid to CCIP/2
under the terms of the Master Loan Agreement. The Master Loan Agreement
matures in November 2000.
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EXHIBIT 28.1 (Continued)
Note D - Notes Payable
The Village Brooke Apartments, located in Cincinnati, Ohio, secures
approximately $6.7 million of first mortgage debt that matured in June
1995 and is superior to the Partnership's related obligation under the
Master Loan of approximately $3.6 million. The General Partner is
negotiating with the lender to extend the maturity of the mortgage debt.
No assurance can be given that the General Partner will be successful in
negotiations with the lender.
The Richmond Plaza Office Building, located in Richmond, Virginia,
secures approximately $14.5 million in mortgage debt which is superior
to the Partnership's related obligation under the Master Loan of
approximately $5.4 million. In March 1995, the General Partner
negotiated a three month extension with the lender which extends the
maturity of the mortgage debt to June 1995. In June 1995, the General
Partner negotiated an additional three month extension with the lender
which extends the maturity of the mortgage debt. No assurance can be
given that the General Partner will be successful in negotiations with
the lender.
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